BridgePort CEO Eyes Off-Exchange Settlement to Reduce Crypto Trading Risks

By Nirup Ramalingam, CEO

Published in John Lothian News

September 29, 2025 – BridgePort is addressing institutional crypto trading vulnerabilities by connecting exchanges to custodians through middleware technology that eliminates the need for firms to pre-fund assets on multiple trading venues, according to CEO Nirup Ramalingam.

The fintech company’s solution aims to prevent incidents like the FTX collapse by allowing trading firms to hold assets with third-party custodians while maintaining trading capabilities across exchanges through credit allocation rather than direct asset deposits.

“BridgePort is a fintech technology company that connects exchanges to custodians,” Ramalingam said in an interview with JLN. “What we do is we connect crypto execution venues to crypto custodians, and that could be an enterprise custodian, banks, wallet providers. The purpose of that is to allow trading firms to hold assets at a custodian escrow and pledge for trading.”

The approach addresses a fundamental infrastructure problem in institutional crypto trading, where firms must deposit assets on multiple exchanges to access liquidity across different venues.

“Today, trading firms are pre-funding assets on multiple exchanges in order to trade crypto, and that obviously subjects them to credit risk, opportunity cost, low ROI, as everyone is aware, and it’s one of the reasons why the FTX implosion was really enabled,” Ramalingam explained.

PARTNERSHIP WITH DEUTSCHE BORSE SUBSIDIARY

BridgePort’s initial rollout includes a partnership with Crypto Finance, a crypto custodian owned by Deutsche Börse Group, to offer off-exchange settlement services targeting European institutional clients.

“What we’re doing is connecting BridgePort’s middleware to Crypto Finance, which will allow trading firms to hold assets at Crypto Finance and pledge that for trading,” Ramalingam said. By pledging it for trading, they no longer have to pre-fund on exchanges.”

The partnership uses Crypto Finance’s “anchored note” product, which allows trading firms to pledge assets held in custody as collateral for exchange trading without transferring ownership or control to the trading venue.

“So the funds are held securely at the custodian. And BridgePort in this off-exchange settlement setup is building out a network of custodians and execution venues,” he said. “So the first announcement we made was with Crypto Finance, and the next coming weeks we’re rolling out more custodians and exchanges.”

Source: John Lothian News

TECHNICAL ARCHITECTURE AND INTEGRATION CHALLENGES

BridgePort’s middleware solution addresses the technical complexity of connecting diverse exchange and custodian systems that operate on different protocols and messaging formats.

“The technical challenges we have to solve is that each stakeholder, whether that’s an exchange or a custodian, is set up differently,” Ramalingam explained. “Our role is to be able to synchronize those messages between an exchange and a custodian or multiple exchanges and custodians at the same time.”

The company builds customized application programming interface (API) adapters for each partner to ensure seamless connectivity while minimizing integration burden on exchanges and custodians.

“So we’ve had to build a purpose-built tech stack that is aimed at making this connectivity very seamless,” he said. “So when we work with the stakeholder whether that’s an exchange or a custodian, we actually write into their APIs and build out a customized adapter on our side to manage that integration and connectivity. So it’s a very low lift friction-free effort for the stakeholder.”

CAPITAL EFFICIENCY AND BENEFITS FOR INSTITUTIONAL TRADERS

The off-exchange settlement model addresses capital inefficiency problems faced by large trading firms that must maintain asset balances across numerous venues to access global crypto liquidity.

“As we’ve spoken to many tier one market makers who are pre-funding on up to 15 different exchanges, if they’re not using those assets at any given point that essentially becomes dead capital sitting there at the exchange,” Ramalingam said.

The custodial approach allows firms to allocate capital dynamically based on trading opportunities rather than maintaining static balances across multiple platforms based on anticipated activity levels.

“So by holding assets at a centralized custodian or at a couple of custodians that are able to allocate credit on the exchange as required as opposed to just doing some guesswork and thinking they may be able to trade at a particular exchange,” he explained. “So capital efficiency increases significantly, and this is going to be a great unlock for the exchanges because that’s going to increase depth of the liquidity as well.”

REGULATORY FRAMEWORK AND GEOGRAPHICAL STRATEGY

BridgePort’s regulatory approach leverages its position as middleware technology that facilitates messaging between regulated entities rather than directly handling execution or custody functions.

“BridgePort is a middleware where a technology layer does not partake in execution or custody,” Ramalingam said. “So we’re passing messages or payloads of data from one endpoint, which would be a custodian to the exchange.”

The company’s initial European focus reflects the regulatory framework governing its custodial partners rather than geographic preferences or market size considerations.

“So in this case Crypto Finance are regulated and set up to do business in Switzerland and parts of Europe and those are the customers they’re targeting and currently onboarding,” he explained.

The target client base includes institutional investors who have entered crypto markets through exchange-traded funds and corporate treasurers using digital assets for balance sheet management.

LESSONS FROM DODD-FRANK IMPLEMENTATION

Ramalingam draws from his experience implementing Dodd-Frank Act requirements for foreign exchange and interest rate swap markets to inform BridgePort’s approach to evolving crypto regulations.

“Dodd-Frank’s ambition was to make the markets more transparent and avoid this sort of systemic risk that caused the GFC in 2008,” he said, referring to the global financial crisis.

He previously worked on building swap execution facilities (SEFs) at companies later acquired by CME Group, providing insight into both intended regulatory outcomes and unintended market fragmentation consequences.

“So what we learned out of those years was regulations have an intended and unintended consequences,” Ramalingam explained. “The intended consequences in Dodd-Frank was to make the markets more transparent. The unintended consequences was to break up liquidity and we saw this specifically with FX NDFs where those non-deliverable forwards that were traded by US persons or those related to US persons was a segregated pool as opposed to another pool which was specifically for non-US persons from Asia and Europe.”

IMPACT OF PROPOSED CLARITY ACT

The pending Financial Innovation and Technology for the 21st Century Act (FIT21), commonly called the Clarity Act, would require crypto exchanges to segregate customer and proprietary assets, addressing the structural vulnerabilities that enabled the FTX collapse.

“One of the pieces in that act is to segregate assets that an exchange holds, a crypto exchange holds for it between the assets it holds for itself and the assets it holds for the customers,” Ramalingam said. “And this is something that we’ve been pushing for and that’s one of the reasons why we even built this company.”

If the FTX situation had occurred under the proposed regulatory framework, customer asset segregation requirements would have prevented the misappropriation of client funds.

“If that was in place with FTX and we had verifiable evidence that the assets were segregated, then there’s nefarious actions that took place a few years back shouldn’t be possible where the exchange is either intentionally or inadvertently using customer funds to prop up the exchange,” he explained.

CFTC CAPACITY AND BROADER MARKET FOCUS

Ramalingam expressed concern about the Commodity Futures Trading Commission’s current reduced commissioner count but emphasized that crypto represents only a small portion of the agency’s broader commodities oversight responsibilities.

“Obviously, I think normally there are five and they’re usually split by party lines where three is along one side and two from the opposing party,” he said regarding the commission structure. “It’s not ideal but I think we are approaching that timeline where a chairman has to be nominated at least before they’re placed into the seat and then hopefully we’ll follow that with the commissioners.”

He cautioned against excessive focus on crypto regulation at the expense of traditional commodity markets that remain under CFTC jurisdiction.

The technology executive emphasized that crypto remains a relatively small but growing market compared to established asset classes, requiring balanced regulatory attention rather than disproportionate focus.

“Crypto is a very small market compared to just about every other asset class,” he said. “It’s a small but growing and burgeoning market and I hope that this fixation on crypto in the last couple of months is exactly that and we’ll be able to move past that focus and get commissioners on board who can appreciate the need for crypto and the need for crypto to be in the US as opposed to regulations by enforcement or having an iron-fisted approach.”

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Reposted from Source: John Lothian News